Economics for Business - PDF

Economics for business

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Demand of the product is the quantity demanded by the consumer at a given price level.
Whereas supply of a commodity is the quantity supplied by the supplier at a given price. With
the change in the price there is a change in the demand of the commodity. Also with the increase
or decrease of the supply quantity there is a change in the price of the quantity supplied. Demand
and supply are the two main forces which determines and effects the price and quantity of the
commodity. This report contains the shift in the demand curve by the change in the demand and
its effect. Also the rightward and leftward movement of the supply curve and its effect on the
price and quantity demanded. Thereafter it includes the equilibrium and the determination of the
equilibrium price and quantity demanded of the company Polo Mints in UK. The various effects
on the equilibrium price and equilibrium quantity demanded by the increase and decrease of
demand and supply.
MAIN BODY
Demand of a commodity is the quantity of goods which a consumer is ready to buy at a
given price. The demand of a commodity have inverse relationship between the price of the
commodity and the quantity demanded by the customers, so when the price rises there will be
decrease in the quantity demanded by the customers. Supply of a commodity is the quantity
supplied by the supplier on the specified price. There is positive relation between the price and
quantity supplied thus when there is increase in the price of commodity there will be increase in
quantity supplied(Armstrong, 2016).
Shift in demand
There is a shift in demand when the demand curve shift rightward or leftward when price
being constant and there are other underlying factors which results in the increase or decrease of
the demand which shifts the demand curve.
Increase in demand-
When there is increase in demand than the demand curve shifts to the rightward. This
increase in demand is caused by the factors like taste and preferences of the customers, the
climatic conditions and the price of other substitute goods. When there is shift in demand the
price remains constant in the company Polo Mints UK(Buckley, 2016). In illustration 1 D1 is the
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increase in the demand and Q1 is the quantity demanded. And P is the price which is constant
when the demand changes.
Decrease in demand-
There is leftward shift in the demand curve when there is decrease in demand. The
decrease in demand is caused by the substitutes goods, goods of perishable nature, income of the
customer. There is decrease in demand when the income of the consumer falls and he tends to
buy less product thus decreasing the demand and causing the shift in the demand curve(Cook,
2017). In illustration 1 D2 is the decrease in demand and Q2 is the quantity demanded on the
demand of D2 where the price remains the same.
Illu
stration 1: Increase and decrease
in demand
(Source: Changes in Market
Equilibrium: Impact of Increase
and Decrease,2019)
Shift in Supply
There is a shift in supply curve when the supply of product increases or decreases which
causes rightward or leftward shift in the supply curve. This shift in the supply curve is due to
several external factors and price remains constant.
Increase in supply-
When there is increase in supply through the various external factors there is rightward
shift in the supply curve where price remaining constant and there is no change in the price of the
commodity. These changes can be due to factors like technological changes, change in
government policies and climatic conditions. When there is inducement of new technological
changes there will be increase in supply of the commodity and the price remaining the same as
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